Why Xero's Boring Wells Fargo Announcement Is Actually A Big Deal

If you're anything like me, you saw the headlines soon about Xero integrating with Wells Fargo but happened to be really excited. Then you see the details of the newest partnership — and felt sort of underwhelmed.

I think like the biggest news will not be what's happening for a while, but what's possible later on as a result of the new relationship.

In case you have not heard what is this great, here's what's happening with Wells Fargo and Xero :

According to your press release , Wells Fargo is going to work with Xero to setup a direct outcomes of Xero's accounting software and Wells Fargo's online banking product. This direct connection enables Xero users to download their bank statement information into Xero for reconciliation.

“We are delighted to integrate with Wells Fargo to get in touch small businesses to your financial services they should be grow and thrive. Xero, as well as Wells Fargo, will help small business owners capture an authentic picture of these financial standing and empower our mutual customers to higher access financial services, offering them greater treatments for their data. We believe this can fundamentally rewire how small enterprises operate, and lightweight a fire within the engine room of the economies.”

— Rod Drury, CEO of Xero

Sound familiar, That's because it's. Xero already gets the capability to download transaction data from Wells Fargo (and a lot banks inside United States). The accounting app creates this change via a alternative party data aggregator” service called Yodlee

The way it really works is that Yodlee uses a person's online banking credentials to sign in on their behalf and screen scrape” transaction data from your online banking interface. Then Yodlee organizes that data and sends it nicely formatted into Xero. This is what Xero calls a bank feed.”

Basically, Wells Fargo is likely to cut Yodlee outside the picture and definately will provide the bank feed straight to Xero instead. The touted benefit has been enhanced security, since now users won't need to provide their passwords to a 3rd party to enable bank feeds.

That's it. Pretty boring, right,

I thought so too — in the beginning. But I don't anymore, after digging in a very bit further.

Let me explain why this partnership are a wide deal, though it doesn't be understood as one.

As Marks points out inside the article, this can be the first time ever a major bank (Wells Fargo) is enabling an accounting application (Xero) to seamlessly access its banking data.”

OK, that's interesting. Not earth shattering, but interesting.

Marks also says this is only the beginning. The door is open.” The idea is the fact eventually more banks follows the leadership of Wells Fargo, and rather than bank feeds, we'll have data returning and forth through the bank to your accounting system and the other way around.

Brett Pitts, head of digital for Wells Fargo, appeared to agree more is to come. He was quoted inside Wall Street Journal as saying until this is a crucial first step.”

So if this is actually the first step, what's next, That's the question that gets me really anxious about this new partnership.

Once Wells Fargo creates the API that enables Xero for connecting directly to online banking, that API may be expanded and used in a lot more than just downloading transaction data. It may be used in strategies vastly improve accounting/banking experience for both business people and accountants.

Imagine logging into Online Bill Pay and seeing a directory of all the bills which are previously applied for your accounting software. To pay your vendors, you merely select the bills you need to pay and type in the dates you desire the payments to visit out. The bills get marked as paid as part of your accounting software, every transaction is automatically reconciled.

This futuristic workflow eliminates duplicate data entry inside a typical business accounts payable process and a lot of the likelihood of errors and fraud. It's an accountant's fantasy now, but could possibly be a reality within the near future if Wells Fargo takes additional steps beyond this first one.

As another example, suppose that your bank syncs images of of your statements, checks, and deposits automatically for your accounting system. No more needing to log into online banking to see those documents when you find yourself trying to reconcile the books.

Or suppose you could categorize all of your respective credit card spending in online banking employing your expense categories through the accounting system, and also have all of those categorized expenses sync automatically into Xero or QuickBooks ,

On the finance side, visualize that you have the choice to give your bank permission to check the books through the API. Your bank can use algorithms and also the detailed transaction data to instantly evaluate if your business qualifies to borrow, and if so, based on how much additionally, on what terms. And you since the business owner don't must do any reporting to the loan when your bank already has access to the many financial data.

That last idea is a reality for alternative lending platforms for example Kabbage , Fundbox , and BodeTree Grabbing a share on this new style of finance activity is an excellent reason for banks to start up and join Xero's financial web”

The probability of stuff like this happening is what's getting me enthusiastic about the Wells Fargo and Xero partnership. Right now, it's not much. But it gets the potential to be considered a really huge problem.

I'm hopeful this first step gets many more.